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RICS tackles ‘unfair’ commercial property service charges

RICS has launched new mandatory requirements to ensure service charges to commercial tenants are transparent, upfront and fair, and that any costs incurred are in accordance with the terms of the occupational leases.

We have long called for a fairer and more professional approach to property management to help outlaw “rogue” landlords and managing agents. The launch of the RICS professional Statement ‘Service charges in commercial property’ this week is a momentous step in helping to better regulate the activities of landlords and their agents, whilst protecting tenants from having to pay for unscrupulous repair or maintenance costs.

RICS has worked with major property bodies representing owners, occupiers and managing agents – including BPF, BRC, BCO, PMA, Corenet, REVO, PMA alongside ICAEW and Law Society, the professional bodies for accountants and lawyers – to produce the recommendations, with balanced requirements that reflect the needs and opinions of landlords and tenants and the specific considerations of different sectors.

Paul Bagust, RICS Global Property Standards Director, said:

“It is hugely encouraging to see all sides of the property industry collaborating and supporting this new document and committing to working to the highest professional standards. This professional statement offers best practice on ensuring occupiers are given clear and concise information on all of the service charges they can expect to pay up front. So, it will help to better protect both landlords and tenants by avoiding costly – and often devastating – disputes over what can be a substantial business overhead.”

The statement also calls for any potential or future changes to service costs to be made clear and obvious to tenants at the outset, and that any costs not specifically mentioned in a lease will not be recoverable from the tenants. The professional statement also provides guidance on more technical matters too, including the way in which service charge monies should be held within bank accounts.

David Tudor-Morgan, Head of Retail Operations, British Land, said:

“These new requirements provide the industry with a clear and robust set of guidelines that equally benefit occupiers, landlords and agents.”

The wider use of mandatory requirements in the new Guidance Note will be of great benefit to responsible Landlords and Tenants alike and will help to remove non-compliant parties and managing agents from the market. The changes come into effect in April 2019 to give adequate time for accounting procedural changes.

“Specsavers operate from nearly 900 retail, office and supply chain properties in the UK and Republic of Ireland. Our estate is primarily leasehold, and the need for a consistent, clear and robust set of guidelines for Commercial Service Charges is self-evident to ensure harmonious Landlord and Tenant relationships and fairness throughout our estate. Specsavers have been fully engaged with the consultation process and will seek to have the principles, where relevant, incorporated into our leases of properties with Service Charges.”